How Much Does the Nation Spend on Welfare? - Public Aid, State Expenditures For Social Welfare, Private Welfare Expenditures, Welfare-reform Legislation

programs percent spending federal

The U.S. Social Security Administration defines social welfare expenditures as the cost of "cash benefits, services, and the administration of public programs that directly benefit individuals and families." This broad definition includes expenditures for social security (Old-Age, Survivor's, Disability, and Health Insurance, or OASDHI), health and medical programs, education, housing, veterans' programs, and public aid programs.

In fiscal year 2000 (the last year for which combined information on social welfare expenditures from all sources is available) federal, state, and local governments spent about $1.01 trillion on social welfare programs. According to the Treasury Department's 2002 Financial Report of the U.S. Government, the total expenditure for social welfare in 2002 was slightly over 4 percent of the gross domestic product (GDP), the monetary total of the domestic goods and services produced by the United States. This reflects a drop of nearly one full percentage point since 1980 and about .75 percent since the early 1990s.

While the Social Security Administration uses a broad definition of social welfare to categorize public expenditures, public welfare, or public aid, is generally taken to refer to cash or noncash assistance for low-income persons. This narrower definition excludes social insurance programs such as Social Security and Medicare, which are considered entitlement programs—that is, programs to which people have a right because of contributions they have made from their earnings.

In 2000 about 56 percent of social welfare expenditures was dedicated to such entitlements as Social Security and Medicare. About 43 percent of social welfare spending was directed toward means-tested programs, including Medicaid and Temporary Assistance for Needy Families (TANF). This volume focuses on welfare programs that provide benefits or services to persons who are determined to be eligible based on a test of their income or "means."

The federal government accounted for about 70 percent of total means-tested spending on social welfare, while state and local governments were responsible for the remaining 30 percent of means-tested expenditures in 2000. The proportion of expenditures at the federal and state level in each category of spending was very different, however. Outlays for medical benefits, primarily Medicaid, made up nearly half (43 percent) of federal welfare spending and about three-fourths (72 percent) of state and local welfare spending. On the other hand, expenditures on food assistance accounted for a little over 10 percent of the total federal welfare spending, while only 1.7 percent of state and local welfare costs funded food assistance programs. (See Table 1.1.)

Federal social welfare expenditures remained relatively stable from 1980 to 2002, making up between 49 and 60 percent of all federal spending. However, expenditures on social welfare have been increasing as a percentage of state and local government costs. State and local spending for social welfare programs continued to increase into the early twenty-first century. This constant rise in costs was a major reason for the severe budget problems faced by local and state governments during the early 1990s. The problem was relieved somewhat by the strong economy of the mid-1990s, which helped the states to absorb these costs. When the economy began to weaken in 2000, however, the problem resurfaced. In 2002 public assistance, Medicaid, and other social welfare programs accounted for about a third of all state outlays.

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Public assistance has usually included such programs as Aid to Families with Dependent Children/Temporary Assistance for Needy Families (AFDC/TANF), General Assistance, and Medicaid. In 2000 public assistance accounted for 43 percent of all public aid spending—a 48 percent increase since 1980. According to the U.S. Census
TABLE 1.1 Government expenditures for income-tested benefits by …

In fiscal year 2002 state governments spent over $1 trillion, an increase of 5.7 percent over 2001. The largest specified expenditures were on elementary and secondary education (21.6 percent) and Medicaid (20.8 percent), followed by higher education (11.2 percent) and transportation (8.1 percent). (See Figure 1.1.) About 2.1 percent went for public assistance to the needy, which totaled $23
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The private sector is an important source of social welfare funding. These expenditures can be grouped into four program categories: health and medical care, welfare services, education, and income maintenance. Welfare services funded by private sources include:
TABLE 1.5 Total spending for income-tested benefits, by type of benefit, selected fiscal years, 1968–2000 [In millions of co…

The intent of the Personal Responsibility and Work Opportunity Reconciliation Act of August 1996 (PRWORA; PL 104-193) was to reduce future welfare expenditures by changing provisions and requiring work from welfare recipients. The 1997 Balanced Budget Reconciliation Act modified some provisions of PL 104-193 and restored and even added funding for certain programs. TANF legislation brought about s…

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